Giftrust Getaway
A new Missouri law lets shareholders escape from a lousy fund.
By Steven Goldberg, Contributing Columnist
From Kiplinger's Personal Finance magazine, May 2005
Investors in American Century Giftrust had the worst of two worlds: lousy performance and a structure that made exiting the fund cumbersome and costly. But now Giftrust's 288,000 account holders can rid themselves of this albatross with a few strokes of the pen, thanks to legislative action in Missouri (where American Century is headquartered) that updated the state's trust law.
Giftrust is unusual. Investors can open accounts only as gifts for others and only in the form of irrevocable trusts with life spans of at least 18 years. The fund, which was originally intended as a college-savings vehicle, has exhibited occasional flashes of brilliance, but results since the mid '90s have generally been horrid. Compared with other funds that invest in fast-growing midsize companies, Giftrust was in the bottom 20% in seven out of nine calendar years between 1996 and 2004. Over the past decade, it gained an annualized 3%, compared with 9% for its peers. The $965-million fund has had 11 managers involved in running it since 1996.
Previously, to escape Giftrust you had to go to court. Now, you can fill out a form that may be downloaded from the company's Web site (www .americancentury.com/trustlaw). Proceeds from the sale go to beneficiaries, who will receive a K-1 form that lists dividends and capital gains. (If the beneficiary is a minor, you may move the money to a custodial account.)
Since the new law took effect in early January, investors have closed about 1,500 accounts. Given Giftrust's sorry record and frequent manager turnover, you may want to join the exodus.